The correction range of copper prices is limited, pending further clarity on the consumer side

After the dovish turn of major central banks and the sharp rise in domestic credit and social finance data in January, the market's optimistic expectations for future demand reached a multi-month high, which was reflected
in the stock market, currency market and commodities.
The return of weak consumption after the year has slowed the pace of color upward movement
.
According to our survey of the downstream sector, in the case of average order execution, no obvious incremental orders and generally high finished product inventory, the rapid and large accumulation of inventories has weakened the expectation of tight supply, and the actual weakness has also caused copper prices to adjust to solid demand
.

Supply is relatively rigid, either fully priced in the price, or the price stimulus is achieved overnight when unexpected situations occur, so the price is more sensitive
to changes in demand expectations.
Standing at the current point, the focus of market contradictions is still on the real recovery of consumption in the peak season and the new round of economic data game
.

Fundamentals will still provide support, first of all, consumption is not "gone" but late
.
According to our recent visits, the overall performance of consumption in the power grid, home appliances, and automobile sectors is average, and incremental consumption has not yet been
reflected.
It is inevitable that there will be some voices in the market, from the early excitement to the pessimistic end
.
Objectively, if consumption is not as optimistic as expected, there is no risk
of short-term collapse.
A large weight of copper demand comes from investment consumption, including power investment and real estate investment, and consumer demand includes home appliances, automobiles and other sectors
.
Power-related investment has rebounded since bottoming out in the second half of last year, and expectations of making up for shortcomings are gradually being realized
.
Another important variable real estate investment, the latest data still maintain a high growth rate, in the context of the decline of land transactions, last year's high new construction will continue to boost construction and completion this year, which is conducive to non-ferrous consumption
in the middle and back ends of real estate.
Stacked infrastructure to make up for shortcomings, copper downstream consumption does not have the risk of
stalling in the short term.

Second, the tension at the mine end came faster than expected, increasing the uncertainty
on the supply side.
At the end of last year, the market generally expected that copper mines could still maintain a relatively loose pattern in the first half of this year, mainly considering the high interference at the smelting end and the stability
of the mine end.
Year-to-date, the disturbance rate of mines is higher than expected, including the interruption of production in major producing areas under the influence of weather, and the reduction
of production in individual mines under the influence of environmental protection and local tax policies.
From the perspective of smelters, although the resumption of production of Indian plants is expected to be cut again, the progress of new smelting capacity in China at the end of last year is faster than market expectations
.
Zero order market transactions fell from $90 at the beginning of the year to around $75, and forward supply concerns in the copper concentrate market rose
.
On the other hand, in the second quarter, supported by the expectation of high maintenance of domestic refineries, the mine and refined copper market may still face a double-tight pattern
.

Finally, the uncertainty still needs to pay attention to the change in scrap copper policy, after July scrap 6 will be converted to restricted category, at the end of December last year, after the announcement of this policy price was quite calm, reverse the market to turn scrap 6 into standard products re-import expectations have been full
.
Approaching the policy implementation period, and copper prices have never priced in this, if the reality seriously deviates from expectations, thinking of zero imports of solid waste by the end of 2020, it may be pushed to the wind
again in the short term.

In summary, even if the current accumulation range in China is high, the global copper inventory base is still at a three-year low
.
Under the expectation that both the mine end and the refined copper end may still be tight in the second quarter, the correction range of copper prices is limited, or more is manifested as high oscillation, pending further clarity on the consumer side
.